Archive for July 2011

While the debate continues in Washington over how tosettle the debt ceiling, the U.S. risks losing its much coveted AAA rating from both Standard & Poor’s and Moody’s. This high rating has enabled the U.S. to borrow funds at a low rate, as their bonds are backed by the full faith and credit of the U.S. government.This is also why the dollar grew to become the world’s number one reserve currency. However, this week, America’s risk to investors surged to its highest level since 2009 according to theCredit Default Swap, an instrument used to gauge such risks. The effect of this surge will have investors thinking twice about investing in U.S. interests, and if the trend continues we could lose our AAA rating.

Many don’t concern themselves much with the global economic picture – even that of their own country – because often it is too convoluted to follow, and just seems better left to those who know. Of course when it comes to our own credit and finances, we don’t have the benefit of financial experts sitting around a table for hours on end telling us the best direction to take. When we lose our credit rating it can seem impossible to find banks offering credit cards for people with no credit. It is the old catch-22.Very few companies now offer credit cards for people with no credit.Banks can be like nervous beach swimmers when no one wants to be the first to test the waters. However, there are ways to improve your credit.

First, make sure your banking is in order. You don’t need credit to open a bank account, and while having a checking or savings account will not establish credit, it is something lenders will most likely take into consideration when deciding to extend you a line. Your employment history will also be taken into consideration.Lenders like stability and steady employment – preferably with the same employer – speaks well of your fidelity. The same holds true for residency, as those who jump around tend to make lenders nervous.Try to have all utilities in your name, and longevity paying these bills will present you as having a stable character.

Another great way get a credit card, with no credit, is to start at the local level. Department stores typically offer their own card to customers. These can be a wonderful way to build credit. Once the card is activated and you have begun making payments, the credit bureaus should pick up this information. As there are some department store cards that don’t report to the credit bureaus, try to find out if yours does;if not, their card will not be of any worth in establishing credit. Be wary of department store credit cards that lure you in with a low interest rate, as they oftentimes grow to a higher rate fairly quickly.

There are always secured credit cards if all else fail. These cards are linked to money you deposit.Should you miss a payment; the bank can simply withdraw the money owed. Typically,secured credit cards will not assist in establishing credit;however, there are a few that will affect your credit limit, so check with your bank. Once you have established credit and have your first non-secured credit card, you can enjoy the convenience of charging. Just don’t follow the government’s economic lead, as you don’t want to end up in over your debt ceiling and lose your good rating.

Identity theft is on the rise in America, and kids are the latest victims. A recent study shows that children’s identities are being stolen at a rate 50 times greater than that of adults

“Child ID theft is a particularly troubling crime because it is often undetected for years,” says director of the FTC’s Bureau of Consumer Protection, David Vladeck.

A child could have his or her social security number appropriated by a stranger from, amongst other places, a school, hospital, or doctor’s office. The theft can occur as soon as a child is born or shortly thereafter. Social Security numbers are issued using a system that is more or less easy to predict, making it possible for thieves to snag brand new numbers, or ones that are just a couple of years old. A child, whose SSN has been taken and used, may not realize that they have been victimized until later in life when they apply for jobs or loans.

Michelle Denned is the former chief privacy officer for Sun Microsystems and vice president for privacy at Oracle Corp. Her 9-year-old daughter has had her identity stolen twice. Because she has focused the majority of her professional life on protecting people’s personal information, it seems surprising that her own daughter could be a two-time victim of identity thieves. “If this can happen to me, this can happen to anyone,” she said.

“The criminals are focused on where is the softest target and we’re handing them our kids,” Michelle asserts. “We have a whole generation of kids being compromised.”

Children typically don’t have any cause to use their social security numbers, so when stolen the thief then has a clean slate with which to establish a record, free from immigration problems or outstanding debt.

Before this disturbing new trend, no one even considered checking their child’s credit report, as children don’t have credit histories. A request for a minor’s credit report can’t even technically be made because, legally, a person does not begin establishing a credit record until the age of 18. The only effective way to thoroughly monitor a child’s identity is to investigate whether or not someone else is using their SSN in conjunction with their own name.

Over 8.1 million identities were stolen in 2010, according to an identity theft and fraud protection report released by Javelin Strategy & Research released in February of this year. Often, there are no obvious warning signs that a child’s identity has been stolen, thus most become victims without even knowing it. Anne Wallace, executive director of the Identity Theft Assistance Centre, said, “Obviously, these are very vulnerable victims.”

This past Thursday, a new law went into effect which requires lending institutions supply consumers with their credit scores, for free, should they decide to deny them credit. Part of the sweeping Dodd-Frank Wall Street Reform and Consumer Protection Act, consumers who are rejected for credit card applications, student loans, or car loans are now entitled to receive a free copy of their credit score along with an explanation of why they were turned down. This new regulation will also apply to those who are “adversely approved” that is, approved but not at the best rates.

The law does not apply to all credit situations. Utility, telephone, and insurance companies, who often use their own in-house scoring systems, are exempt. However, if you were denied credit due to a low FICO or VantageScore (score created by the three major credit bureaus), the lender must supply you with your score along with general information for the denial. They must also inform you of how to obtain your credit report.

Everyone should know the content of their credit report, as the effects of this report are far reaching and beyond that of simply being invoked when applying for a loan or credit card. Banks are not the only ones interested in your score. People can be denied jobs or access to housing based on these numbers. Even if you’ve always been a good credit risk, a simple clerical error can lead to inaccurate information on your report. If this is the case, you can submit a report dispute and clean your report. The largest impact on your credit report is your payment history, if you have accounts in arrears for 30-60 days; bring them up to date before they take a toll on your score. And while creditors are not required to remove collection accounts from your credit report, some are open to negotiation.

Try to pay down your credit card balances, but if this is impossible at this time, do make sure to make at least the minimum payment. Transferring your credit card balance to one with a 0% APR can save a lot of money, but do keep in mind the 0% APR is typically just an introductory rate and will expire. When considering switching credit cards, take into consideration their rewards programs; this is another moneysaving device. Cash back programs can literally put money in your pocket when you shop or – like the Shell credit card – when you drive.

While no one enjoys being denied credit, at least now the denial will come with an explanation. Something good can come from something bad if you let this be a starting point for you to repair whatever damage your credit may have incurred.

The current super-low interest rates are making some people happy, for instance those who are looking to buy a car, apply for a credit card, or transfer an existing credit card balance. But for people who are struggling to make ends meet using the income earned from the interest on their savings accounts, such as retirees, today’s rates are making things increasingly difficult.

In June, the Federal Reserve Board said that, at least for the near future, they plan to keep interest rates low. So for investors who depend on interest to survive, it’s going to take a bit of legwork for those looking to sink their money into a CD to find rates that will, at the very least, keep up with inflation. Other alternatives are dividend-paying stocks or short-term bond funds, but both of those options come at the cost of not being FDIC-insured.

“In this interest-rate environment, you either have to take on a little more volatility or accept a lower return,” says Laura Thurow, co-director of Baird Wealth Private Wealth Management Research.

The best CD rates available are still the ones with the longest terms. According to most consumer financial services companies, the average return an investor can expect on a five-year certificate of deposit is 1.64%, although with a bit of digging, some banks are offering as much as 2.36% for a CD on those terms. While those rates are vastly better than the ones available for short-term CDs, investors still run the risk that, if they tie their money up for so long for such a low return, interest rates will increase before the CD matures.

For the most part, investors want to steer clear of CD situations where they would find themselves tempted to break the terms and withdraw their money early, as early-withdrawal typically comes with stiff penalties by way of high fees. These fees could eat up any interest that accrued in the meantime. The same, aforementioned consumer financial services company discovered that some 13% of banks charge investors one year’s interest if they cash out their 5-year CD early. Ouch! And, more and more, banks may be increasing their penalties for early withdrawal of funds to discourage investors from cashing out early.

People seeking other options for safe ways to invest their money, but also wanting the highest possible interest rates, should look into rewards checking accounts, online savings accounts, or I bonds. There are plenty of pros and cons associated with each of one of these investment choices – as with CD’s – so sit down and do your homework first.

NEW YORK (TheStreet) — Independent financial research company Defaqto recently stated the average interest rate on credit cards has grown by 2.6% over the past five years, a jump of 15.8% to 18.4%, on average. Perhaps it is because of this sharp increase that credit lenders have increased the duration of their 0% introductory rate periods. During that same five-year period, the availability of credit cards offering a 0% APR has doubled. It is good news for those who can take advantage of such offerings with a healthy credit rating.

Those with a better credit rating can more readily hop around, card to card, as they would most likely be accepted by more lenders, essentially guaranteeing themselves a 0% APR for an extended period. Those with a lesser credit score will find less opportunity for jumping around, but with all the options available they too should be able to enjoy some of the advantages of 0% financing as low-interest credit cards become harder to come by.

The past several years have seen a change in the standard credit card model — as low interest rates become harder to offer, lenders are instead offering a slew of options to gain consumers’ business. The 0% APRs are just one of many perks on the table. Everything from rewards programs, to frequent flyer miles, to cash back programs are being placed as bait for business.

Cash back programs are now tailored to individual need: There are programs for supermarkets, hotels, gas stations, theme parks. The list is long and consumers can choose which retailers they are most likely to spend money on and enjoy the benefits of cash back. Most cash back programs reward you with 1% back on your purchases. There are some credit cards that offer as much as 5% back, but you may have to shop around a little more to locate those.

While you are shopping around, keep in mind that all 0% introductory rates are not created equal. Know the duration of the introductory rate, as herein lies the difference. On average, the introductory rate lasts for six months, with some lasting as long as 12 months. There are even credit cards that extend this rate for up to two years, but they are few and far between

NEW YORK (TheStreet) — It was not that long ago, when parents’ most sagacious advice to their offspring was to play it safe and get a city job, a federal job, or a state job.

They espoused the great benefits that came along with government employment: Steady, almost guaranteed work, union benefits, early retirement and health benefits. “If you get in early, you’ll be retired by 40,” was a common argument.

Of course, turning 40 can sound pretty much like the end of the line to an 18-year old. I mean who cares about retirement at 40, aren’t you pretty much too old to do anything of any relevance at that age?

Teens raised in the last few decades tended to model their futures after their cultural icons. Movies such asWall Street, Glengarry Glen Ross, and even Working Girl had heroes and heroines who stormed into the corporate offices across America and took charge. In the ninety minutes it took for their stories to be told, they came, they saw, and they conquered the boardrooms.

So, most of us chose the corporate world over the government job route. We didn’t get the movie glamour, of course, but we at least got a taste of trying to climb the corporate ladder.

Today, when corporations all over America are reducing the size of their workforces daily, some say out of necessity, some say to keep profit margins up in order to keep their stock prices from declining, these private sector jobs are becoming more difficult to come by.

Many of those who snickered at the idea of a federal job are now rethinking that hasty decision. Unfortunately, that ship may have already sailed.

Federal agencies are not far behind corporate America in the freezing of new hires. Many agencies are not only under a hiring freeze, but have also seen severe cutbacks in their current workforce. The trend shows no sign of slowing either. Daily there are reports of firehouses closing, police forces being reduced, and many municipal

NEW YORK (TheStreet) — In Wall Street’s latest battle over debit cards framed as a David vs. Goliath clash between small-business owners and the large banks, the real loser in the fight is the American consumer.

The Federal Reserve announced this month its final regulations that will cap debit-card swipe fees charged to merchants at 21 cents per transaction. While financial institutions argue that they stand to lose as much as $10 billion to $14 billion per year in revenue collected from merchants, the merchants insist that the 21-cent cap does little to alleviate their financial plight.

For financial institutions, the 21-cent cap is preferable to the original proposal of a 12-cent per transaction cap that would have cost the industry almost 75% of the income received prior to the rule change. Keep in mind that even at the proposed 12-cent cap, the profit margin is still 70% for the lender. This is hardly small change when considering that Americans now use debit cards more often than credit cards, checks, or cash, according to a 2008 Survey of Consumer Payment Choice. This is still a hefty profit placed on the primary way in which consumers choose to make their purchases.

The industry currently claims an average debit-card swipe fee of 44 cents, thus imposing a 21-cent cap would greatly diminish their profits. But as every lawyer and financial expert knows, it’s all in how you crunch the numbers.

In fact, the new rules allow another 0.05 percent of the value of each transaction to be tacked on to cover fraud prevention, so analysts estimate that that will bring the average swipe fee up to 24 cents. Before the new rules, debit card issuers charged a swipe fee of one to two percent of the value of the transaction.

The impact of these new regulations on the consumer will most likely be slow and subtle. Over time, the financial institutions will no doubt phase in fees or cut programs in an effort to recover whatever revenue was lost.

Higher ATM fees, lower limits on debit cards or simply doing away with free checking are all possibilities, as is the implementation of a debit card swipe fee passed directly to the consumer. Simply upon hearing of impending debit card swipe fee reductions, major lenders such as Wells Fargo(WFC_), JPMorgan Chase(JPM_), and SunTrust(STT_) either eliminated or greatly curtailed their rewards programs.

Consumers also can only take it on faith that reducing the cost of operating a business for retailers will translate into lower prices at the register. If the past is a dependable forecaster of the future, this has rarely been the case. In these battles of financial power plays, where every side claims to be the victim, both David and Goliath tend to walk away pretty much unscathed.